Introduction
Canadian banks are among the most trusted financial institutions in the world, known for their stability and customer service. However, some critics argue that these banks may not always act in the best interest of their clients, particularly when it comes to disclosing profitable investment opportunities or high-yield savings options. There have been allegations that banks prioritize their own profits over helping customers maximize their earnings.
This article explores how Canadian banks might obscure money-making opportunities, focusing on real cases, regulatory concerns, and expert opinions.
1. High-Interest Savings Accounts (HISAs) and Hidden Rates
Many Canadian banks offer High-Interest Savings Accounts (HISAs), but the advertised rates are often much lower than what is available through smaller financial institutions or online banks. A report from Ratehub.ca (2023) found that while big banks like RBC, TD, and Scotiabank offer HISAs with rates as low as 0.01% to 1.5%, digital banks like EQ Bank and Tangerine provide rates between 3% to 5%.
Why don’t major banks promote better rates?
- They profit more from low-interest deposits.
- They rely on customer inertia (people not switching banks).
- They may not actively inform clients about better alternatives.
Source:
- *”Best High-Interest Savings Accounts in Canada 2023″*, Ratehub.ca. Link
2. Overlooking GIC Promotions for Higher-Yield Investments
Guaranteed Investment Certificates (GICs) are a safe way to earn interest, but banks often push lower-yield options unless customers specifically ask for promotions. A CBC News investigation (2022) revealed that banks sometimes withhold information about limited-time GIC offers with higher rates unless clients inquire directly.
Example:
- A customer at a major bank was offered a 1-year GIC at 2.5%, while the same bank had a promotional rate of 4.5% that was not advertised.
Source:
- “Are banks hiding better GIC rates from customers?”, CBC News, 2022. Link
3. Mutual Funds with High Fees Instead of Low-Cost ETFs
Canadian banks heavily promote mutual funds, which often come with high management fees (2% or more). However, low-cost Exchange-Traded Funds (ETFs) (with fees as low as 0.05% to 0.5%) are rarely recommended unless a customer specifically asks.
A 2021 report from the Ontario Securities Commission (OSC) found that many investors were unaware of cheaper alternatives because advisors at banks earn higher commissions from selling mutual funds.
Source:
- “Investor Advisory Panel Report on Mutual Fund Fees”, OSC, 2021. Link
4. Not Discharging Mortgage Penalties Fairly
When customers break their mortgages early, banks charge penalties—often thousands of dollars. A Globe and Mail report (2023) found that banks sometimes calculate these penalties in a way that maximizes their profits rather than using the fairest method.
Example:
- Banks may use the “interest rate differential” (IRD) method, which can lead to much higher penalties than the standard three months’ interest rule.
Source:
- “How banks calculate mortgage penalties—and why it costs you”, The Globe and Mail, 2023. Link
5. Withholding Information About Cashback and Rewards Programs
Many Canadian banks offer cashback credit cards or rewards programs, but customers may not be informed about the best options unless they specifically ask. A 2023 study by CreditCards.com found that only 30% of customers were aware of the highest cashback cards available at their own bank.
Why does this happen?
- Banks may push lower-reward cards first to reduce payout costs.
- Employees may be incentivized to sell certain products over others.
Source:
- “Are Canadians missing out on better credit card rewards?”, CreditCards.com, 2023. Link
Conclusion: Are Banks Acting in Customers’ Best Interest?
While Canadian banks are regulated and generally trustworthy, there is evidence that they may not always disclose the most profitable options to customers. Whether it’s savings accounts with higher interest, better GIC rates, low-fee ETFs, or fair mortgage penalties, customers must do their own research to ensure they’re not missing out.
Key Takeaways:
- Compare rates across different banks and online institutions.
- Ask directly about promotions (GICs, mortgage penalties, credit cards).
- Consider independent financial advisors who aren’t tied to a single bank.
By staying informed, Canadians can ensure they’re not leaving money on the table due to undisclosed opportunities.
